GSB in new project to boost business

11 July 2002
SMALL businesses in the Western Cape stand to benefit from a R1-million agreement between the UCT Centre for Innovation and Entrepreneurship (CIE) at the Graduate School of Business and Lanok, a public entity that acts as the implementing agent for the Department of Economic Affairs, Agriculture and Tourism in the Western Cape.

The agreement will result in a capital fund for small and medium enterprises (SMEs) in and around Cape Town. The GSB will work with Lanok to channel the money into loans and investments for businesses which, because they lack collateral and because of their location, have been unable to obtain finance from conventional sources such as banks and other institutions.

Director of the CIE Mike Herrington, and Lanok MD, Tom de Wet, said that the agreement shows that provincial government has faith in the small business sector.

The CIE at the GSB already runs a number of successful initiatives to help small businesses in the Western Cape. Last year, the Centre, in association with Mallinicks Attorneys, distributed development funding, procured from an anonymous overseas philanthropist, to 22 disadvantaged SMEs. The mechanism has proved to be extraordinarily successful in growing the businesses and providing important employment opportunities.

"After 12 months not one of these 22 businesses have failed or stopped making repayments on loans, which by any standards is quite remarkable," said Herrington. A number of the businesses have flourished. One woman, for example, who made and sold biscuits on her own, has grown her business and now employs 14 people. Another pottery manufacturer has tripled the size of its workforce in the last 12 months as a result of the loans and business support. A third business was recently selected by the World Conservation Union (IUCN) as one of only nine entrepreneurs to take part in a project to showcase community-based enterprises at the World Summit on Sustainable Development in Johannesburg in September.

Herrington says that this unusually high success rate is partly because of the unique funding mechanism, which does not involve simply lending people money but rather buying them goods and equipment where needed, and partly because of the complementary business support the CIE can provide the businesses.

"We don't just help the businesses by providing them with funding," said Herrington. "We provide them with valuable, but free business advice through programmes linked to the MBA and by running basic business training programmes at the Graduate School of Business. We also link them up with experienced business mentors who give of their time freely and advise and guide the SMEs."

Herrington said that the Lanok funds will be used to fund a pilot project to develop further options for entrepreneurs from disadvantaged communities. One of the aims is to use the money recovered from the SMEs repayments and reinvest them into other businesses.

"The funds will be paid into an existing fund held by Mallinikcs Attorneys and distributed according to these same principles," said Herrington. "We are confident that our success will continue and that the businesses we select will benefit significantly."

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